Local Media and the Local Housing Market

Abstract

The residential housing market is dominated by households who are often inefficient at processing information. This paper presents evidence consistent with media playing an information provisional role, and thereby affecting short-term house price dynamics. Firstly, through county-level panel time-series regression using data from 269 counties and newspaper articles as a proxy for the media, I find that counties with increase in housing related articles experience 7 to 10 annualized bp higher housing returns than other counties 4 to 6 months afterwards. This effect is persistent throughout the whole sample except during the housing crisis when there were higher than average amount of negative housing news. The increase in housing return is reversed in 10 to 12 months. Secondly, using Google Trends data as a proxy for households' home-owning interest, I show through FOMC meeting dates as an instrumental variable that media causally affects households' home-buying interest.

Keywords: Short-term House Price Movement, Media, Information

JEL Classification: D10, G11